Yearender: Stocks defy odds, end up for 6th consecutive year

MANILA, Philippines - Constantly battered and bruised, the Philippine stock market has shown resiliency in a year filled with great expectations but ended up on the short end of the measuring stick.

Call it a roller-coaster ride, a seesaw journey, or even an uphill and downhill adventure, one thing was evident in 2014-the local stock exchange simply held up amiddownward pressures of slower economic growth, sliding oil prices, political tensions abroad, and several calamities.

With a spurt of rallies and a string of collapse here and there, analysts and industry experts were generally satisfied with the stock market’s performance last year, especially with the mettle it has displayed despite the challenging year.

“I am happy to note that the Philippine Stock Exchange index will again close the year up from last year’s close.  This will mark the sixth consecutive year that the index ends on positive territory,” said Philippine Stock Exchange (PSE) president and chief executive officer Hans B. Sicat.

The main index closed the year 2014 at 7,230.57 on Monday, 22.76 percent higher than its closing level of 5,889.83 points in 2013.

“I think we had a very robust 2014. Trading levels were obviously lower, but we’ve had more issuances,” Sicat said.

“Being part of the stock market, we’re used to the ups and downs so we always think of it in the longer term. What we’re hoping for is for publicly-listed companies to continue to demonstrate strength in terms increasing their revenues and net income as a group which has been the kind of PSE story over the last four or five years now,” he added.

Joyce Anne J. Ramos, equity analyst at AB Capital Securities Inc., said local stocks generally recovered from its weak and volatile movement in 2013, when the PSE index soared to a high of 7,403.65 in May before stumbling to a low of 5,562 in August.

For 2014, Ramos said Philippine-listed equities sustained a strong uptrend despite the general tension brought about by the issue between Ukraine and Russia earlier in the year, US interest rate hike anxiety amid the ending of the quantitative easing last October, and the domestic inflationary concerns which caused the Bangko Sentral ng Pilipinas to hike its interest rate to six percent for overnight lending.

“No major downtrend was observed as companies have generally performed better this year (2014) versus the previous year,” she said.

The PSEi also took some huge blows from the slower pace of growth of the country’s gross domestic product (GDP) recorded in the first and third quarter of the year.

Justino Calaycay Jr., analyst at Accord Capital Equities Corp., has in fact dubbed 2014 as a “year of failed assumptions from the macro-economy as well as on the corporate fronts.”

“GDP disappointed in Q1 and even more so in Q3, but Q2 results were fair. It is practically conceded that the full year will miss even the lower end of the 6.5-percent to 7.5-percent target band pegged by the government under the Medium Term Development Plan,” Calaycay said.

“Corporate earnings, on the other hand, based on the data we have at hand, has grown less than 10 percent year-on-year. This is far from what we incorporated into our outlook at the beginning of the year which is between 15 percent and 20 percent, which would’ve justified an index level of between 6,700 to 6,900,” he added.

Calaycay, however, admitted that he has been impressed with the market’s ability to hold its year-to-date gains at above 20 percent despite the challenging environment.

“If it performs as well every time, we certainly wouldn’t mind being proven wrong. And this lays a perfect foundation for developing next year’s outlook-if stocks can pull out a 20- percent gain amid a substantially slower economic growth, you can just imagine how it may perform when the over-all economic data improves,” he said.

Aside from the already reported negative leads which resulted in market volatility, the PSE also literally weathered several storms this year, forcing the local bourse to take a break three times this year.

Trading was suspended in the local bourse in July 16, Sept. 19, and Dec. 8 due to the onslaught of Typhoon Glenda, Tropical Storm Mario and Typhoon Ruby, respectively.

Still, the local stock market was able to recover from such adversities that it flirted several times on shattering previous highs for the year.

It successfully did so in Dec. 3 as the bellwether index climbed to a new record high for 2014 at 7,360.75.

The market’s attractiveness also became apparent as it saw seven new firms debut in the stock market in 2014.

Xurpas Inc., Phoenix Semiconductor Philippines Corp., DoubleDragon Properties Corp., Century Pacific Food Inc. and SSI Group Inc. conducted  their  initial public offerings while Top Frontier Investment Holdings Inc. and Trans-Asia Petroleum Corp. listed by way of introduction.

“We’ve had some very exciting initial public offerings (IPOs) this year. I think some of the transactions had the unfortunate situations of having a harder time getting their documentation together,” Sicat said.

Analysts said firms like Nickel Asia, D&L Industries, First Gen, Cebu Air, Universal Robina Corp., JG Summit, Energy Development Corp., BDO and Bloomberry were among the companies which had the best performing stocks for 2014 while firms like Petron, LT Group, Alliance Global, Aboitiz Equity Ventures, and Meralco “could have done better.”

“Among the disappointments this year (2014) were probably construction related counters. We were quite confident that its share prices will post strong numbers in 2014 given avowals by government of a more aggressive PPP roll-out. While there were a good number of projects bidded out and began in the first quarter, the pace quite faded as the year progressed,” Calaycay said.

Moving forward, all hopes remain bright coming in to 2015 as the stock market prepares for another strong push next year.

Analyst are more inclined to forecast a mixed sentiment but with a positive bias.

“Our outlook for 2015 is neutral-bullish as there are many macroeconomic factors that may influence the market. In general, we think that corporate earnings remain healthy, as we have observed during the previous quarters,” Ramos said.

“There is an almost equal number of reasons the market should go higher as there are for such rallies to be tempered. On the domestic end, we enter 2015 armed with a fresh credit rating upgrade from S&P which now considers the economy as two notches above junk status. As a pre-presidential election year, we also can expect increases in consumer spending as well as government spending, trends consistent with historical data,” Calaycay added.

Luis Limlingan, managing director at Regina Capital Development Corp., however, warned of several factors that may shoot down 2015’s expected growth.

Most of these factors, he said, are the usual suspects like geopolitical tensions abroad, the country’s growth prospects, and US interest rate hike.

However, two of the relatively uncommon events to watch out for 2015 will include the possible power supply crisis in Luzon and the continuing saga of declining global oil prices.

 “Estimates are ranging from 100 megawatts  to 1,000-MW shortfall  for Luzon are during the peak periods in the summer. This may temporarily drive electricity bills higher, or worse, cause a disruption in businesses if there are unexpected blackouts,” Limlingan said regarding the looming power crisis by  the summer of 2015.

“As the price continues to fall and the floor hasn’t been reached, the perceived drop in the world oil supply may serve as a snapshot of the world economy’s overall health. Countries that are dependent on the commodity as one of their primary exports are going to feel the pinch,” he said, referring to the downward movement in oil prices.

But even though it is initially scaring off various investors,  plunging oil prices are seen to benefit the country in the long run, according to RCBC Securities Inc. president Gerald O. Florentino.

Florentino said lower oil prices could only mean lower gasoline and electricity bills for consumers.

“It’s negative right now, but in the long run it should be positive for the Philippines because it would result to more disposable income for the ordinary Filipino so more spending power,” he said.

With a generally positive outlook for the new year, RCBC Securities head of research Raul P. Ruiz believes the market would be able to trade between 7,500 to 7,700 levels in 2015 on the back of a 15-percent growth in corporate earnings and a minimum 6.5-percent GDP growth.

“If the market rallies, it can go up by at least 100 points a day,” Ruiz said.

As it leaves the wounds and bruises of 2014 behind, the stock market will not have much time to heal as it now jumps into another bumpy ride this 2015. Whether it would remain resilient enough to endure upcoming developments is for investors to find out in the coming months.